Several disastrous blunders led to the current economic crisis, says Nobel-prize winning economist, Joseph E. Stiglitz in Vanity Fair.

For starters, says Stiglitz, the Reagan administration's dismissal of Federal Reserve Chairman Paul Volcker and naming Alan Greenspan to replace him. Volcker was an advocate of strict regulation of financial markets; Greenspan was not.

Also, the repeal in November 1999 of the Glass-Steagall Act, which allowed commercial banks and investment banks to merge. Commercial banks must be conservative money managers and prudent lenders, writes Stiglitz. Investment banks undertake riskier ventures. Combining the two puts depositor funds in jeopardy.

The Bush tax cut of the capital gains rate also encouraged speculation — Stiglitz calls it gambling — and resulted in "excessive borrowing and lending."

Lastly, says Stiglitz, "The bailout package was like a massive transfusion to a patient suffering from internal bleeding — and nothing was being done about the source of the problem, namely all those foreclosures." Treasury Secretary Henry Paulson's bailout plan did not address this underlying problem.

Summing up, Stiglitz writes that there was really just one big mistake: "A belief that markets are self-adjusting and that the role of government should be minimal."

Greenspan may agree. Testifying before Congress this past October, the former Fed chairman admitted that he was "partially wrong" when he opposed stricter government regulation of markets.